PRICE T ROWE GROUP INC. Discussion and analysis by management of the financial position and operating results. (form 10-Q)


PREVIEW.

Our revenues and net income are derived primarily from investment advisory
services provided to individual and institutional investors in U.S. mutual
funds, subadvised funds, separately managed accounts, collective investment
trusts, and other T. Rowe Price products. The other T. Rowe Price products
include open-ended investment products offered to investors outside the U.S.,
and products offered through variable annuity life insurance plans in the U.S.
We also provide certain investment advisory clients with related administrative
services, including distribution, mutual fund transfer agent, accounting, and
shareholder services; participant recordkeeping and transfer agent services for
defined contribution retirement plans; brokerage; trust services; and
non-discretionary advisory services through model delivery.

We manage a broad range of U.S., international and global stock, bond, and money
market mutual funds and collective investment trusts and other investment
products, which meet the varied needs and objectives of individual and
institutional investors. Investment advisory revenues depend largely on the
total value and composition of assets under our management. Accordingly,
fluctuations in financial markets and in the composition of assets under
management affect our revenues and results of operations. Additionally,
approximately 30% of our operating expenses are impacted by fluctuations in our
assets under management.

We incur significant expenses to develop new products and services and to improve and expand our capabilities and distribution channels in order to attract new investment advisor clients and additional investments from our existing clients. These efforts often involve costs that precede any future income we might see from an increase in our assets under management.

The general trend to passive investing has been persistent and accelerated in
recent years, which has negatively impacted our new client inflows. However,
over the long term we expect well-executed active management to play an
important role for investors. In this regard, we remain debt-free with ample
liquidity and resources that allow us to take advantage of attractive growth
opportunities. We are investing in key capabilities, including investment
professionals, distribution professionals, technologies, and new product
offerings in order to provide our clients with strong investment management
expertise and service.

MARKET TRENDS.

Major U.S. stock market indexes were mixed in the third quarter. Large-cap
shares outperformed. Stocks generally rose through early September, supported by
favorable second-quarter corporate earnings reports. However, the spread of the
delta variant of the coronavirus weighed on the economic recovery. Toward the
end of the quarter, investors turned cautious as longer-term U.S. Treasury
yields climbed amid growing expectations that the Federal Reserve could soon
begin to taper its monthly asset purchases. Investors were also concerned that
Congress had not yet passed legislation that raises or eliminates the debt
ceiling, which is the statutory limit on the federal government's borrowing
ability.

European stock markets were widely mixed in U.S. dollar terms; UK shares fell
marginally. Developed Asian and Far East markets were also mixed. Japanese
shares rose close to 5%, whereas Hong Kong stocks slumped more than 9% due in
part to Chinese regulatory developments.

Emerging markets equities generally declined. In Latin America, Brazilian shares
tumbled more than 20% in U.S. dollar terms; in Asia, South Korean shares slumped
13%. Emerging European markets rose broadly, though Turkish stocks trailed the
region with a 2% gain.



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The returns of several major stock indexes were as follows:

                                                                       Three months ended           Nine months ended
Index                                                                      9/30/2021                    9/30/2021
S&P 500 Index                                                                 .6%                         15.9%
NASDAQ Composite Index(1)                                                    (.4)%                        12.1%
Russell 2000 Index                                                           (4.4)%                       12.4%
MSCI EAFE (Europe, Australasia, and Far East) Index                          (.4)%                         8.8%
MSCI Emerging Markets Index                                                  (8.0)%                       (1.0)%

(1) Returns exclude dividends

Global bond returns produced mostly flat or negative returns in U.S. dollar
terms. In the U.S., long-term Treasury yields initially declined, but they rose
in late September after the Federal Reserve signaled that it could soon moderate
the pace of its monthly asset purchases. The 10-year U.S. Treasury yield
increased from 1.45% to 1.52% during the quarter.

In the taxable investment-grade bond universe, all major segments-including
Treasuries, corporate bonds, and mortgage- and asset-backed securities-were
essentially flat. Tax-free municipal securities fell slightly and trailed the
taxable investment-grade bond market. High yield bonds produced slight positive
returns and outperformed high-quality issues.

Bonds in developed non-U.S. markets declined as longer-term interest rates in
various countries rose and a stronger U.S. dollar reduced local returns to U.S
investors. The Japanese yen fell about .5% versus the greenback, while the euro
and British pound dropped more than 2%.

Emerging markets bonds also declined. Local currency issues fared worse than
dollar-denominated debt, as the South African rand, the South Korean won, and
several Latin American currencies fell materially against the U.S. dollar.

The returns of several major bond indices were as follows:

                                                                         Three months ended           Nine months ended
Index                                                                        9/30/2021                    9/30/2021
Bloomberg Barclays U.S. Aggregate Bond Index                                    .1%                         (1.6)%
JPMorgan Global High Yield Index                                                .6%                          4.6%
Bloomberg Barclays Municipal Bond Index                                        (.3)%                         .8%
Bloomberg Barclays Global Aggregate Ex-U.S. Dollar Bond Index                  (1.6)%                       (5.9)%
JPMorgan Emerging Markets Bond Index Plus                                      (1.1)%                       (4.2)%




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ASSETS UNDER MANAGEMENT.

Assets under management ended the third quarter of 2021 at $1,612.3 billion, a
decrease of $10.8 billion from June 30, 2021, and an increase of $141.8 billion
from the end of 2020. For the three months ended September 30, 2021, the
decrease in assets under management was driven by net cash outflows of $6.4
billion and market depreciation, including distributions not reinvested, of $4.4
billion. Clients transferred $3.6 billion in net assets from the U.S. mutual
funds primarily to collective investment trusts and other investment products,
of which $1.9 billion transferred into the retirement date trusts.

For the nine months ended September 30, 2021, the increase in assets under
management was driven by market appreciation, net of distributions not
reinvested, of $147.6 billion, partially offset by net cash outflows of $5.8
billion. Clients transferred $18.4 billion in net assets from the U.S. mutual
funds primarily to collective investment trusts and other investment products,
of which $12.7 billion transferred into the retirement date trusts.

The following tables detail changes in our assets under management, by vehicle
and asset class, during the three- and nine-month periods ended September 30,
2021:
                                                                  Three months ended 9/30/2021                                                               Nine months ended 9/30/2021
                                                                                        Collective                                                                                Collective
                                                                                        investment                                                                                investment
                                                                                        trusts and                                                                                trusts and
                                                              Subadvised funds            other                                                         Subadvised funds            other
                                          U.S. mutual           and separate            investment                                  U.S. mutual           and separate            investment
(in billions)                                funds                accounts               products             Total                    funds                accounts               products             Total
Assets under management at beginning of
period                                    $   865.8          $         426.9          $     330.4          $ 1,623.1                $   794.6      

$ 400.1 $ 275.8 $ 1,470.5

Net cash flows before client transfers           .1                     (5.8)                 (.7)              (6.4)                     3.2                    (21.9)                12.9               (5.8)
Client transfers                               (3.6)                      .5                  3.1                  -                    (18.4)                     2.0                 16.4                  -
Net cash flows after client transfers          (3.5)                    (5.3)                 2.4               (6.4)                   (15.2)                   (19.9)                29.3               (5.8)
Net market (depreciation)/appreciation
and (losses)/gains                             (1.1)                     (.8)                (2.3)              (4.2)                    82.1                     40.6                 25.4              148.1
Net distributions not reinvested                (.2)                       -                    -                (.2)                     (.5)                       -                    -                (.5)

Change during the period                       (4.8)                    (6.1)                  .1              (10.8)                    66.4                     20.7                 54.7              141.8

Assets under management at September 30,
2021                                      $   861.0          $         420.8          $     330.5          $ 1,612.3                $   861.0          $         420.8          $     330.5          $ 1,612.3


                                                                   Three months ended 9/30/2021                                                     

Nine months ended 09/30/2021

                                                              Fixed income,                                                                             Fixed income,
                                                             including money                                                                           including money
(in billions)                                Equity              market              Multi-asset(1)            Total                   Equity              market              Multi-asset(2)            Total
Assets under management at beginning of
period                                     $ 985.1          $        178.7          $        459.3          $ 1,623.1                $ 895.8          $        168.7          $        406.0          $ 1,470.5

Net cash flows                                (8.4)                    2.1                     (.1)              (6.4)                 (28.8)                   11.2                    11.8               (5.8)
Net market (depreciation)/appreciation and
(losses)/gains(2)                             (2.0)                    (.1)                   (2.3)              (4.4)                 107.7                      .8                    39.1              147.6

Change during the period                     (10.4)                    2.0                    (2.4)             (10.8)                  78.9                    12.0                    50.9              141.8
Assets under management at September 30,
2021                                       $ 974.7          $        180.7          $        456.9          $ 1,612.3                $ 974.7          $        180.7          $        456.9          $ 1,612.3


(1) The underlying assets under management of the multi-asset portfolios have
been aggregated and presented in this category and not reported in the equity
and fixed income columns.
(2) Includes distributions reinvested and not reinvested.

Investment advisory clients outside the United States account for 8.8% of our
assets under management at September 30, 2021, 9.0% at June 30, 2021, and 9.3%
at December 31, 2020.


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Our target date retirement products, which are included in the multi-asset totals shown above, continue to represent a significant portion of our assets under management. The assets under management of these portfolios, as well as the net cash inflows (outflows), per vehicle, are as follows:

                                                                                                                             Net cash inflows (outflows)
                                           Assets under management                                      Three months ended                                 Nine months ended
(in billions)                 9/30/2021           6/30/2021           12/31/2020                   9/30/2021             9/30/2020                   9/30/2021             9/30/2020
U.S. mutual funds           $    183.4          $    185.0          $     176.1                $       (.7)            $     (2.9)               $     (9.4)             $     (9.6)
Collective investment
trusts                           182.2               182.0                145.4                        1.4                   (2.8)                     21.7                     4.1
Subadvised and separately
managed accounts                  12.1                12.2                 10.7                          -                     .2                        .4                      .5
                            $    377.7          $    379.2          $     332.2                $        .7             $     (5.5)               $     12.7              $     (5.0)


We provide participant accounting and administration of defined contribution pension plans that invest in we mutual funds, collective investment trusts, and funds outside the corporate complex. From
September 30, 2021, our assets under administration were 260 billion dollars, of which nearly 173 billion dollars are assets that we manage.

In recent years, the firm began offering non-discretionary advisory services
through model delivery and multi-asset solutions for providers to implement. We
record the revenue earned on these services in administrative fees. The assets
under advisement in these portfolios, predominantly in the United States, were
$8 billion at September 30, 2021.

INVESTMENT RETURN.

Strong investment performance and brand awareness is a key driver to attracting
and retaining assets-and to our long-term success. Our performance disclosures
include specific asset classes, assets under management weighted performance,
mutual fund performance against passive peers and composite performance against
benchmarks. The following tables present investment performance for the one-,
three-, five-, and 10-years ended September 30, 2021. Past performance is no
guarantee of future results.

% of we mutual funds that outperformed the Morningstar median (1), (2)

                                                     1 year                         3 years                         5 years                    10 years
Equity                                                56%                             74%                             68%                        85%
Fixed Income                                          71%                             58%                             53%                        60%
Multi-Asset                                           89%                             94%                             85%                        90%

All Funds                                             70%                             75%                             68%                        78%

% of we mutual funds that outperformed the passive peer median (1), (3)

                                                     1 year                         3 years                         5 years                    10 years
Equity                                                53%                             68%                             68%                        71%
Fixed Income                                          88%                             68%                             57%                        47%
Multi-Asset                                           89%                             92%                             81%                        86%

All Funds                                             74%                             76%                             69%                        68%

% of composites outperforming benchmarks (4)

                                                     1 year                         3 years                         5 years                    10 years
Equity                                                48%                             63%                             72%                        73%
Fixed Income                                          85%                             79%                             81%                        85%

All Composites                                        63%                             69%                             76%                        78%




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AUM Weighted Performance
% of U.S. mutual funds AUM that outperformed Morningstar median(1),(2)
                                               1 year                 3 years                  5 years                  10 years
Equity                                          58%                     68%                      80%                      92%
Fixed Income                                    77%                     52%                      55%                      69%
Multi-Asset                                     98%                     96%                      96%                      96%

All Funds                                       69%                     73%                      81%                      91%

% of we Outstanding mutual funds that outperformed the passive peer median (1), (3)

                                               1 year                 3 years                  5 years                  10 years
Equity                                          39%                     62%                      84%                      81%
Fixed Income                                    96%                     61%                      58%                      43%
Multi-Asset                                     94%                     92%                      95%                      96%

All Funds                                       56%                     70%                      85%                      82%

% of composite assets under management that outperformed benchmarks (4)

                                               1 year                 3 years                  5 years                  10 years
Equity                                          35%                     65%                      71%                      71%
Fixed Income                                    86%                     85%                      77%                      80%

All Composites                                  44%                     68%                      72%                      72%


As of September 30, 2021, 73 of 123 (59.3%) of the firm's rated U.S. mutual
funds (across primary share classes) received an overall rating of 4 or 5 stars.
By comparison, 32.5% of Morningstar's fund population is given a rating of 4 or
5 stars(5). In addition, 86%(5) of AUM in the firm's rated U.S. mutual funds
(across primary share classes) ended September 30, 2021 with an overall rating
of 4 or 5 stars.

(1) Source: © 2021 Morningstar, Inc. All rights reserved. The information
contained herein: 1) is proprietary to Morningstar and/or its content providers;
2) may not be copied or distributed; and 3) is not warranted to be accurate,
complete, or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this information.
(2) Source: Morningstar. Primary share class only. Excludes money market mutual
funds, funds with an operating history of less than one year, T. Rowe Price
passive funds, and T. Rowe Price funds that are clones of other funds. The top
chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5
year, and 10 year track record that are outperforming the Morningstar category
median. The bottom chart reflects the percentage of T. Rowe Price funds AUM that
has outperformed for the time periods indicated. Total AUM included for this
analysis includes $518B for 1 year, $518B for 3 years, $518B for 5 years, and
$508B for 10 years.
(3) Passive Peer Median was created by T. Rowe Price using data from
Morningstar. Primary share class only. Excludes money market mutual funds, funds
with an operating history of less than one year, funds with fewer than three
peers, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of
other funds. This analysis compares T. Rowe Price active funds to the applicable
universe of passive/index open-end funds and ETFs of peer firms. The top chart
reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and
10 year track record that are outperforming the passive peer universe. The
bottom chart reflects the percentage of T. Rowe Price funds AUM that has
outperformed for the time periods indicated. Total AUM included for this
analysis includes $504B for 1 year, $498B for 3 years, $490B for 5 years, and
$422B for 10 years.
(4)Composite net returns are calculated using the highest applicable separate
account fee schedule. Excludes money market composites. All composites compared
to official GIPS composite primary benchmark. The top chart reflects the
percentage of T. Rowe Price composites with 1 year, 3 year, 5 year, and 10 year
track record that are outperforming their benchmarks. The bottom chart reflects
the percentage of T. Rowe Price composite AUM that has outperformed for the time
periods indicated. Total AUM included for this analysis includes $1,501B for 1
year, $1,498B for 3 years, $1,482B for 5 years, and $1,446B for 10 years.
(5) The Morningstar Ratingâ„¢ for funds is calculated for funds with at least a
three-year history. Exchange-traded funds and open-ended mutual funds are
considered a single population for comparative purposes. It is calculated based
on a Morningstar Risk-Adjusted Return measure that accounts for variation in a
managed product's monthly excess performance, placing more emphasis on downward
variations and rewarding consistent performance. Morningstar gives its best
ratings of 5 or 4 stars to the top 32.5% of all funds (of the 32.5%,10% get 5
stars and 22.5% get 4 stars). The Overall Morningstar Ratingâ„¢ is derived from a
weighted average of the performance figures associated with a fund's 3, 5, and
10 year (if applicable) Morningstar Ratingâ„¢ metrics.


RESULTS OF OPERATIONS.

The following table and discussion sets forth information regarding our
consolidated financial results for the three and nine months ended September 30,
2021 and 2020 on a U.S. GAAP basis as well as a non-GAAP basis. The non-GAAP
basis adjusts for the impact of our consolidated T. Rowe Price investment
products, the impact of market movements on the supplemental savings plan
liability and related economic hedges, investment income related to certain
other investments, and certain nonrecurring charges and gains, if any.

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                                Three months ended                     Q3 2021 vs. Q3 2020                            Nine months ended                     YTD 2021 vs. YTD 2020
(in millions, except
per-share data)            9/30/2021          9/30/2020           $ change             % change                 9/30/2021          9/30/2020            $ change             % change
U.S. GAAP basis
Investment advisory fees  $ 1,813.4          $ 1,469.3          $    344.1                 23.4  %             $ 5,288.4          $ 4,090.9          $   1,197.5                 29.3  %
Net revenues              $ 1,954.1          $ 1,595.8          $    358.3                 22.5  %             $ 5,710.2          $ 4,473.8          $   1,236.4                 27.6  %

Operating Expenses $ 957.9 $ 866.9 $ 91.0

                10.5  %             $ 2,862.7          $ 2,484.0          $     378.7                 15.2  %

Net operating income $ 996.2 $ 728.9 $ 267.3

                36.7  %             $ 2,847.5          $ 1,989.8          $     857.7                 43.1  %
Non-operating income
(loss)(1)                 $   (11.5)         $   191.6          $   (203.1)                    n/m             $   234.5          $   106.4          $     128.1                     n/m
Net income attributable
to
T. Rowe Price             $   777.2          $   643.2          $    134.0                 20.8  %             $ 2,342.3          $ 1,589.3          $     753.0                 47.4  %
Diluted earnings per
common share              $    3.31          $    2.73          $      .58                 21.2  %             $    9.94          $    6.66          $       3.3                 49.2  %
Weighted average common
shares outstanding
assuming dilution             229.1              229.4          $      (.3)                 (.1) %                 229.4              231.9          $      (2.5)                (1.1) %

Adjusted non-GAAP
basis(2)
Operating expenses        $   957.2          $   830.5          $    126.7                 15.3  %             $ 2,798.2          $ 2,434.2          $     364.0                 15.0  %

Net operating income $ 998.7 $ 768.0 $ 230.7

                30.0  %             $ 2,916.2          $ 2,046.9          $     869.3                 42.5  %
Non-operating income
(loss)(1)                 $    (3.0)         $    25.6          $    (28.6)                    n/m             $    28.5          $    50.2          $     (21.7)                    n/m
Net income attributable
to T. Rowe Price          $   767.6          $   602.7          $    164.9                 27.4  %             $ 2,258.6          $ 1,596.6          $     662.0                 41.5  %
Diluted earnings per
common share              $    3.27          $    2.55          $      .72                 28.2  %             $    9.59          $    6.69          $      2.90                 43.3  %

Assets under management (in billions)
Average assets under
management                $ 1,648.7          $ 1,292.9          $    355.8                 27.5  %             $ 1,581.3          $ 1,198.9          $     382.4                 31.9  %
Ending assets under
management                $ 1,612.3          $ 1,310.4          $    301.9                 23.0  %             $ 1,612.3          $ 1,310.4          $     301.9                 23.0  %


(1) The percentage change in non-operating income (loss) is not meaningful
(n/m).
(2) See the reconciliation to the comparable U.S. GAAP measures at the end of
the Results of Operations section of this Management's Discussion and Analysis.

Results overview – Quarter ended September 30, 2021

Investment advisory revenues. Investment advisory fees are earned based on the
value and composition of our assets under management, which change based on
fluctuations in financial markets and net cash flows. As our average assets
under management increase or decrease in a given period, the level of our
investment advisory fee revenue for that same period generally fluctuates in a
similar manner. Our annualized effective fee rates can be impacted by market or
cash flow related shifts among asset and share classes, price changes in
existing products, and asset level changes in products with tiered-fee
structures.

Investment advisory revenues earned in the third quarter of 2021 increased over
the comparable 2020 quarter as average assets under our management increased
$355.8 billion, or 27.5%, to $1,648.7 billion. In the third quarter of 2021, we
voluntarily waived $13.7 million, or less than 1%, of our investment advisory
fees in order to continue to maintain a positive yield for investors. At
September 30, 2021, combined net assets of the investment portfolios in which we
waived fees in the third quarter of 2021 were $23.7 billion. We anticipate that
the waivers in the fourth quarter of 2021 will be at a similar level to the
third quarter of 2021 and expect to continue to waive fees into 2022.

The average annualized effective fee rate earned during the third quarter of
2021 was 43.6 basis points, compared with 45.2 basis points earned during both
the third quarter of 2020 and the second quarter of 2021. In comparison to the
third quarter of 2020, our annualized effective fee rate declined primarily due
to the July 2021 fee reductions in our target-date products, client transfers
within the complex to lower fee vehicles or share classes over the last twelve
months and the money market fee waivers. These fee pressures were partially
offset as higher market valuations led to an asset class shift towards equity
strategies.

Operating expenses. Operating expenses were $957.9 million in the third quarter
of 2021 compared with $866.9 million in the third quarter of 2020. The increase
in our operating expenses was primarily due to higher compensation costs and
higher distribution and servicing costs as average assets under management
increased over prior year. Also contributing to the increase in operating
expenses during the quarter were costs incurred as a

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result of our previously announced expanded relationship with FIS, a global
technology leader, in which FIS assumed responsibility for managing retirement
technology development and core operations for our full-service recordkeeping
offering on August 1, 2021. During the quarter, the firm incurred recordkeeping
costs, which were partially offset by a reduction in the compensation expenses
related to the approximately 800 associates who transitioned to FIS, as well as
transition costs associated with the expanded relationship.

These increases were partially offset by lower compensation expenses related to
the supplemental savings plan. For the third quarter of 2021, the decrease in
the supplemental savings plan expense was entirely offset by a corresponding
decrease in the non-operating gains earned on the investments used to
economically hedge the related liability.

The firm employed 7,124 associates at September 30, 2021, a decrease of 7.2%
from the end of 2020 and 6.7% from September 30, 2020. Excluding the approximate
800 associates that became employees of FIS on August 1, 2021, headcount would
have increased approximately 3% from both the end of 2020 and from September 30,
2020.

On a non-GAAP basis, our operating expenses in the third quarter of 2021
increased 15.3% to $957.2 million compared to the third quarter of 2020. Our
non-GAAP operating expenses exclude the impact of our supplemental savings plan
and consolidated sponsored investment products. See our non-GAAP reconciliations
later in this Management's Discussion and Analysis section.

Operating margin. Our operating margin in the third quarter of 2021 was 51.0%,
compared to 45.7% earned in the 2020 quarter. The increase in our operating
margin for the third quarter of 2021 compared to the 2020 period was primarily
driven by higher investment advisory fee revenue and lower expense related to
our supplemental savings plan, partially offset by higher product and
recordkeeping expenses as well as distribution and servicing costs.

Diluted earnings per share. Diluted earnings per share was $3.31 for the third
quarter of 2021 as compared to $2.73 for the third quarter of 2020. The 21.2%
increase was primarily driven by higher operating income, as strong markets
since the end of the third quarter of 2020 have increased average assets under
management resulting in higher investment advisory fee revenue, and a lower
effective tax rate. This increase was partially offset by net investment losses
recognized in the third quarter of 2021 as compared to significant net
investment gains in the third quarter of 2020, as the sharp market returns in
2020 quarterly outpaced the market performance in the third quarter of 2021.

On a non-GAAP basis, diluted earnings per share was $3.27 for the third quarter
of 2021 as compared to $2.55 for the third quarter of 2020. Similar to our GAAP
diluted earnings, the increase is largely attributable to higher operating
income compared to 2021 period.

Results Overview - Year-to-Date ended September 30, 2021
Investment advisory revenues. Investment advisory revenues earned in the nine
months ended September 30, 2021 increased over the comparable 2020 period as
average assets under our management increased $382.4 billion, or 31.9%, to
$1,581.3 billion. We waived $43.0 million, or less than 1%, of total investment
advisory fees from certain of our money market mutual funds, trusts and other
investment portfolios during the nine months ended September 30, 2021.

The average annualized effective fee rate earned on our assets under management
during the nine months ended September 30, 2021 was 44.7 basis points compared
with 45.6 basis points earned during the same period of 2020. Our annualized
effective fee rate declined primarily due to the July 2021 fee reductions in our
target-date products, client transfers within the complex to lower fee vehicles
or share classes over the last twelve months and the money market fee waivers.
These fee pressures were partially offset as higher market valuations led to an
asset class shift towards equity strategies.

Operating expenses. Operating expenses were $2,862.7 million in the nine months
ended September 30, 2021 compared with $2,484.0 million in the 2020 period. More
than half of the increase in operating expenses was due to higher compensation
expenses, including higher interim bonus accrual, increased salaries and
benefits, and a $14.2 million increase in operating expenses related to the
supplemental savings plan due to higher market returns in the nine months ended
September 30, 2021 as compared to the nine months ended September 30, 2020. For
the nine months ended September 30, 2021, the increase in the supplemental
savings plan expense was entirely offset by a corresponding increase in the
non-operating gains earned on the investments used to economically hedge the

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related liability. Also contributing to the increase in operating expenses were
higher distribution and servicing costs due to higher average assets under
management and higher product and recordkeeping costs due to the expanded FIS
arrangement.

On a non-GAAP basis, our operating expenses for the nine months ended September
30, 2021 increased 15.0% to $2,798.2 million compared to the 2020 period. Our
non-GAAP operating expenses exclude the impact of our supplemental savings plan
and consolidated sponsored investment products. See our non-GAAP reconciliations
later in this Management's Discussion and Analysis section.

In 2021 and beyond, we expect to advance our strategic priorities to maintain
our position as a global and diversified asset manager, a global partner for
retirement investors and a provider of integrated investment solutions; to embed
environmental, social and governance and sustainability principles across the
firm; to maintain effective processes and controls while becoming a more
adaptive and agile firm; and to become a destination of choice for top talent
with a diverse workforce and inclusive culture. We narrowed our 2021 non-GAAP
operating expense growth guidance from a range of 12% - 15% to a range of 13% -
15% to reflect results year-to-date and expectations for the fourth quarter of
2021. This expense excludes any acquisition costs expected to be incurred in
relation to the announced agreement to acquire OHA. We can elect to adjust our
expense growth in the future should unforeseen circumstances arise, including
significant market movements. As discussed in July 2021, the impact of our
expanded partnership with FIS is reflected in the expense growth guidance above.

Operating margin. Our operating margin in the nine months ended September 30,
2021 was 49.9%, compared to 44.5% earned in the 2020 period. The increase in our
operating margin for the nine months ended September 30, 2021 compared to the
2020 period was primarily driven by higher net revenues, partially offset by
higher compensation costs and product and recordkeeping costs as well as
distribution and servicing costs.

Diluted earnings per share. Diluted earnings per share was $9.94 for the nine
months ended September 30, 2021 as compared to $6.66 for the nine months ended
September 30, 2020. The 49.2% increase was primarily driven by higher net
income, lower weighted average outstanding shares, and a lower effective tax
rate.

On a non-GAAP basis, diluted earnings per share was $9.59 for the nine months
ended September 30, 2021 as compared to $6.69 for the 2020 period. The increase
in adjusted diluted earnings per share was primarily due to higher operating
income and lower weighted average outstanding shares. See our non-GAAP
reconciliations later in this Management's Discussion and Analysis section.



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Net revenues
                                 Three months ended                     Q3 2021 vs. Q3 2020                           Nine months ended                     YTD 2021 vs. YTD 2020
(in millions)               9/30/2021          9/30/2020           $ change            % change                 9/30/2021          9/30/2020            $ change             % change
Investment advisory fees
U.S. mutual funds          $ 1,125.5          $   939.5          $   186.0                 19.8  %             $ 3,273.2          $ 2,638.8          $     634.4                 24.0  %
Subadvised funds, separate
accounts, collective
investment trusts, and
other investment products      687.9              529.8              158.1                 29.8  %               2,015.2            1,452.1                563.1                 38.8  %
                             1,813.4            1,469.3              344.1                 23.4  %               5,288.4            4,090.9              1,197.5                 29.3  %
Administrative,
distribution, and
servicing fees
Administrative fees            109.8               98.0               11.8                 12.0  %                 331.8              300.8                 31.0                 10.3  %
Distribution and servicing
fees                            30.9               28.5                2.4                  8.4  %                  90.0               82.1                  7.9                  9.6  %
                               140.7              126.5               14.2                 11.2  %                 421.8              382.9                 38.9                 10.2  %
Net revenues               $ 1,954.1          $ 1,595.8          $   358.3                 22.5  %             $ 5,710.2          $ 4,473.8          $   1,236.4                 27.6  %

Average assets under management (in billions)
U.S. mutual funds          $   881.0          $   708.8          $   172.2                 24.3  %             $   848.1          $   664.0          $     184.1                 27.7  %
Subadvised funds, separate
accounts, collective
investment trusts, and
other investment products      767.7              584.1              183.6                 31.4  %                 733.2              534.9                198.3                 37.1  %
                           $ 1,648.7          $ 1,292.9              355.8                 27.5  %             $ 1,581.3          $ 1,198.9                382.4                 31.9  %



Investment advisory fees.

U.S. mutual funds
Investment advisory revenues earned in the third quarter of 2021 from our U.S.
mutual funds were $1,125.5 million, an increase of 19.8% from the comparable
2020 quarter. Average assets under management in these funds for the third
quarter of 2021 increased 24.3% from the 2020 quarter to $881 billion. The
annualized effective fee rate of 50.7 basis points for the third quarter of 2021
decreased from 52.7 basis points in the third quarter of 2020. In comparison to
the third quarter of 2020, our annualized effective fee rate for U.S. mutual
funds decreased primarily due to the July 2021 fee reductions in our target date
products and increased money market fee waivers.

For the nine months ended September 30, 2021, investment advisory revenues
earned from the firm's U.S. mutual funds were $3,273.2 million, an increase of
24.0% from the comparable 2020 period. Average assets under management in these
funds for the nine months ended September 30, 2021 increased 27.7% from the 2020
period to $848.0 billion. The annualized effective fee rate of 51.6 basis points
for the nine months ended September 30, 2021 decreased from 53.1 basis points
for the nine months ended September 30, 2020. Our annualized effective fee rate
for our U.S. mutual funds decreased primarily due to the July 2021 fee
reductions in our target date products and increased money market fee waivers.
In addition, strong market returns contributed to a relative decrease in the
percentage fee earned as the asset levels of certain tiered-fee funds crossed a
new tier.

Subadvised funds, separate accounts, collective investment trusts and other
investment products (other portfolios)
Investment advisory revenues earned in the third quarter of 2021 from these
other portfolios were $687.9 million, an increase of 29.8% from the comparable
2020 quarter. Average assets under management for these products increased 31.4%
from the 2020 quarter to $767.7 billion. The annualized effective fee rate of
35.5 basis points for the third quarter of 2021 decreased from 36.1 basis points
in the third quarter of 2020. In comparison to the third quarter of 2020, our
annualized effective fee rate for our other portfolios was primarily due to the
July 2021 fee reductions in our target date products.

For the nine months ended September 30, 2021, investment advisory revenues
earned from subadvised and separate accounts as well as collective investment
trusts and other investment products were $2,015.2 million, an increase of 38.8%
from the 2020 period. Average assets under management for these products
increased 37.1% from the 2020 period to $733.3 billion. The annualized effective
fee rate of 36.7 basis points for the nine months ended September 30, 2021
increased from 36.3 basis points for the nine months ended September 30, 2020.
Our

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the annualized effective commission rate of our other portfolios increased mainly due to the evolution of the mix towards equities and flows to our international products, slightly offset by the July 2021 cost reductions on our products on target date.

Administrative, distribution, and servicing fees. Administrative, distribution,
and servicing fees in the third quarter of 2021 were $140.7 million, an increase
of $14.2 million, or 11.2%, from the comparable 2020 quarter. For the nine
months ended September 30, 2021, these fees were $421.8 million, an increase of
$38.9 million, or 10.2%, from the 2020 period. The increase was primarily due to
higher transfer agent servicing activities provided to the U.S. mutual funds,
higher model delivery revenue, as well as higher 12b-1 revenue earned on the
Advisor and R share classes of the U.S. mutual funds as a result of increased
assets under management in these share classes. The increase in 12b-1 revenue is
offset entirely by an increase in the costs paid to third-party intermediaries
that source these assets and are reported in distribution and servicing expense.

Our net revenues reflect the elimination of advisory and administrative fee
revenue earned from our consolidated
T. Rowe Price investment products. The corresponding expenses recognized by
these products, and consolidated in our financial statements, were also
eliminated from operating expenses. For the third quarter, we eliminated net
revenue of $1.6 million in 2021 and $2.7 million in 2020. For the nine months
ended September 30, we eliminated net revenue of $4.0 million in 2021 and $7.3
million in 2020

Operating expenses

                                             Three months ended                      Q3 2021 vs. Q3 2020                           Nine months ended                    YTD 2021 vs. YTD 2020
(in millions)                          9/30/2021             9/30/2020          $ change            % change                 9/30/2021          9/30/2020           $ change            % change
Compensation and related costs,
excluding supplemental savings plan $    564.9             $    517.6          $   47.3                  9.1  %             $ 1,692.3          $ 1,496.6          $   195.7                 13.1  %
Supplemental savings plan(1)               (.3)                  34.7             (35.0)                    n/m                  59.6               45.4          $    14.2                 31.3  %
 Total compensation and related
costs                                    564.6                  552.3              12.3                  2.2  %               1,751.9            1,542.0              209.9                 13.6  %
Distribution and servicing                96.0                   73.5              22.5                 30.6  %                 274.3              201.2               73.1                 36.3  %
Advertising and promotion                 22.1                   14.2               7.9                 55.6  %                  61.4               52.5                8.9                 17.0  %
Product and recordkeeping related
costs                                     70.3                   36.8              33.5                 91.0  %                 154.6              118.0               36.6                 31.0  %
Technology, occupancy, and facility
costs                                    123.1                  115.6               7.5                  6.5  %                 359.7              332.3               27.4                  8.2  %
General, administrative, and other        81.8                   74.5               7.3                  9.8  %                 260.8              238.0               22.8                  9.6  %

Total operating expenses            $    957.9             $    866.9          $   91.0                 10.5  %             $ 2,862.7          $ 2,484.0          $   378.7                 15.2  %

(1) The impact of the market on the liabilities of the additional savings plan determines the expense recognized in each period.

Compensation and related costs, excluding supplemental savings plan.
Compensation and related costs, excluding supplemental savings plan, were $564.9
million in the third quarter of 2021, an increase of $47.3 million, or 9.1%,
compared to the 2020 quarter. The increase from the 2020 quarter was primarily
due to a $32.5 million increase in our interim bonus accrual. We recognize the
interim bonus accrual ratably over the year using the ratio of recognized
quarterly net revenues to currently forecasted annual net revenues. Also
contributing to the increase in 2021 costs compared to the third quarter of 2020
was a $16.1 million increase in salaries and benefits due to modest increases in
base salaries at the beginning of the year and an increase in our average staff
size before the transition of approximately 800 T. Rowe Price operations and
technology associates to FIS on August 1, 2021.

For the nine months ended September 30, 2021, compensation and related costs,
excluding supplemental savings plan, were $1,692.3 million, an increase of
$195.7 million, or 13.1%, compared to the 2020 period. The increase in
compensation and related costs from the 2020 period was primarily due to a
$121.7 million increase in our interim bonus accrual. Also contributing to the
increase in costs compared to 2020 was a $78.1 million increase in salaries and
benefits due to modest increases in base salaries at the beginning of the year
and an increase in our average staff size before the transition of approximately
800 operations and technology associates to FIS on August 1, 2021. These
increases in compensation and related costs were offset in part by $11.7 million
in higher labor capitalization related to internally developed software in 2021
period.

Distribution and servicing. Distribution and servicing costs were $96.0 million
for the third quarter of 2021, an increase of 30.6% from the $73.5 million
recognized in the 2020 quarter. For the nine months ended September 30, 2021,
these costs were $274.3 million, an increase of 36.3% over the $201.2 million
recognized in the comparable 2020 period. The increase is primarily driven by
higher AUM-based distribution costs as a result of continued market

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the appreciation and inflows of our international products, including our Japanese investment funds (ITM) and our SICAVs. The higher costs incurred to distribute certain other products through we
financial intermediaries, as the assets under management of these products increased compared to the previous year.

Amounts paid to third-party intermediaries who procure the assets of the Advisor and R share classes from our we mutual funds and our international products, such as our Japanese ITMs and SICAVs, are recognized in the distribution and management expense category. These two costs are fully offset by the income we earn and present in net income: 12b-1 income recognized in administrative, distribution and service costs for the we
mutual funds and income from investment advisory fees for our international products.

Advertising and promotion. Advertising and promotion costs were $22.1 million in
the third quarter of 2021, an increase of $7.9 million, or 55.6%, compared to
the $14.2 million recognized in the 2020 quarter. For the nine months ended
September 30, 2021, these costs were $61.4 million, an increase of $8.9 million,
or 17.0%, compared to the 2020 period. The increase in both the third quarter
and nine months ended September 30, 2021 was driven primarily by the media spend
related to the launch of a new brand marketing campaign and the promotion of the
firm's target date solutions, along with lower spending in 2020 due to the
impact of the coronavirus pandemic.

Product and recordkeeping related costs. Product and recordkeeping costs were
$70.3 million in the third quarter of 2021, an increase of $33.5 million, or
91%, compared to the $36.8 million in the 2020 quarter. For the nine months
ended September 30, 2021, these costs were $154.6 million, an increase of $36.6
million, or 31%, compared to the 2020 period. More than 85% of the increase in
the third quarter and more than 80% of the increase in the nine months ended
September 30, 2021 was driven primarily by the recordkeeping costs incurred as
part of our expanded FIS relationship, including certain transition expenses
that will extend into the fourth quarter of 2021 but not recur in 2022. While
these transition expenses will not recur, we do expect to incur certain
technology-related costs as part of this expanded relationship with FIS over the
next few years. These will be reported as technology, occupancy, and facility
costs.
Technology, occupancy, and facility costs. Technology, occupancy, and facility
costs were $123.1 million in the third quarter of 2021, an increase of $7.5
million, or 6.5%, compared to the $115.6 million recognized in the 2020 quarter.
For the nine months ended September 30, 2021, these costs were $359.7 million,
an increase of $27.4 million, or 8.2%, compared to the 2020 period. The increase
is due primarily to the ongoing investment in our technology capabilities,
including hosted solution licenses and depreciation. Increased facility-related
costs also contributed to the increase for the nine months ended September 30,
2021.

General, administrative, and other. General, administrative, and other expenses
were $81.8 million in the third quarter of 2021, an increase of $7.3 million, or
6.1%, compared to the $74.5 million recognized in the 2020 quarter. Higher
research costs primarily due to additional investment professional headcount,
higher information services and travel-related costs were the primary
contributors to the higher costs in the third quarter of 2021 compared to 2020.

For the nine months ended September 30, 2021, general, administrative, and other
expenses were $260.8 million, an increase of $22.8 million, or 9.6%, compared to
the 2020 period. Higher information services and research costs were primary
contributors to the higher costs in 2021 as compared to 2020. Travel-related
expenses were lower compared to the nine months ended September 30, 2020, due to
the impact of the coronavirus pandemic.

Non-operating profit (loss)

Non-operating loss for the third quarter of 2021 was $11.5 million, a decrease
of $203.1 million from non-operating income of $191.6 million in the 2020
quarter. For the nine months ended September 30, 2021, non-operating income was
$234.5 million, an increase of $128.1 million from non-operating income of
$106.4 million in the comparable 2020 period. The following table details the
components of non-operating income for both the third quarter and nine months
ended September 30, 2021 and 2020.


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